Honda and Nissan are in talks to merge by 2026, in an effort to fight intense competition from Chinese rival cars makers , such as Tesla and BYD.
Reuters reports on Monday, that the tie-up would create the world’s third-largest auto group by vehicle sales after Toyota and Volkswagen (VOWG).
It would also give the two companies scale and a chance to share resources in the face of intense competition from Tesla (TSLA.O), and Chinese rivals, such as BYD.
The merger of Honda, Japan’s second-largest automaker, with Nissan, its No. 3, would be the biggest reshaping in the global auto industry since Fiat Chrysler Automobiles and PSA merged in 2021 to create Stellantis (STLAM.MI) in a $52-billion deal.
Smaller Mitsubishi Motors was also considering joining and would make a decision by the end of January, the companies said.
The chief executives of all three held a joint press conference in Tokyo.
“The rise of Chinese automakers and new players has changed the car industry quite a lot,” said Honda CEO Toshihiro Mibe, citing technological trends of electrification and autonomous driving. “We have to build up capabilities to fight with them by 2030, otherwise we’ll be beaten.”
The two companies would aim for combined sales of 30 trillion yen ($191 billion) and operating profit of more than 3 trillion yen through the potential merger, they said.
They aimed to wrap up talks around June 2025 before setting up a holding company by August 2026, when shares of both companies would be delisted.
Honda, which has a market capitalization of more than $40 billion, roughly four times that of Nissan, will appoint the majority of the company’s board, they said.
Combining with Mitsubishi Motors would take the Japanese group’s global sales to more than 8 million cars. The current No. 3 is South Korea’s Hyundai and Kia.